CFD vs Forex Differences and Similarities

Trading CFDs and trading Forex are both profitable ways to invest; however, one of these instruments might suit your trading needs better than the other. Continue reading our CFD vs Forex guide to figure out which instrument you should trade.

We’ll also go over why and how you begin trading with us at CAPEX – the best online broker for CFDs.

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Trade in a wide range of markets

The best part about trading CFDs is that they offer diversification. CFD traders have the privilege of investing in numerous markets of their choice, which reduces the risk of loss and adds up to a great trading portfolio.

Here at CAPEX, we offer over 2100 instruments that can be traded through CFDs. Whether you’re interested in commodities, stocks, indices, ETFs, or Forex – you can simply sign up with CAPEX and invest in the markets of your choice with the lowest trading fees.

Learn how to trade on our CFD trading demo account

Beginning your investment journey can be an overwhelming experience, and the risk of losing your money only adds to the fear. So, it’s always beneficial to trade on a risk-free demo account before risking your funds on an actual trading account.

Here at CAPEX, we offer a smooth CFD demo trading account that looks and feels exactly like our actual trading account but involves trading with fake money. You can sign up on our demo account to practice trading until you feel comfortable enough to invest your money. Plus, we also allow our demo account users to benefit from our excellent learning tools.

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How do CFDs work – CFD trading 101

CFD or contract for differences is a popular form of financial derivatives, where a buyer and a seller speculate on an asset’s future price and agree to exchange the difference in the asset’s value over a given period. CFD trading does not involve the buying or selling of any underlying assets; instead, CFD traders only buy and sell contracts.

Buying or selling CFDs?

CFD trading allows traders to benefit from falling as well as rising markets. For instance, if you expect the market to go up, you can go long and buy an open position or contract. On the other hand, if you feel the market will go down, you can go short or sell an open position.

A huge pro of trading CFDs is that you can diversify your trades because CFDs can be traded on various instruments, including stocks, commodities, Forex, indices, ETFs, blends, and bonds.

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Pros and cons of trading CFDs

Pros of trading CFDs

  • You can diversify your trades.
  • You get to obtain greater market exposure with a lower initial investment.
  • You can renew your contract – so there isn’t a fixed expiry date.
  • CFDs are simple instruments to trade.
  • The trading costs are lower as you don’t buy or sell any assets.

Cons of trading CFDs

  • The primary con of trading CFDs is that they’re extremely risky instruments. Most CFD trades end up in loss.
  • When trading with CFDs, you don’t own the underlying asset.

How does Forex trading work – Forex trading 101

Forex or foreign exchange is one of the largest markets in the world, with an annual turnover of trillions of dollars. As the name suggests, Forex traders buy and sell foreign currencies to make a profit from the shifting currency values.

How does Forex work?

For instance, if you want to trade USD for GBP, you’ll go for the currency pair USD/GBP, check the exchange rate, speculate whether the exchange would be profitable in the future, then make the trade through an online broker or exchange platform.

While trading foreign exchange is a great way to capitalize on your funds, it’s also risky because currency prices can be affected by numerous factors, including environmental factors or decisions made by large financial institutions.

Many benefits when trading with CAPEX

We at CAPEX offer excellent customer support seven days a week, some of the the lowest trading costs, and the smoothest trading experience with the help of advanced tools. All our offerings are a result of our dedication to providing traders with the best trading experience.

Pros and cons of trading Forex

Pros of trading Forex

  • Forex is the largest market worldwide with great earning potential.
  • Trading Forex allows traders to benefit from rising as well as falling markets by either going short or going long.
  • Forex can be traded with leverage so traders can make larger investments with less capital.

Cons of trading Forex

  • The leverage provided in Forex trading is high, which multiplies the trading risk.
  • Forex trading can be difficult to manage.
  • There are many factors that affect the value of a currency, out of which most factors are impossible to predict—for instance, storms and tsunamis, environmental damage of any sort, or an epidemic.
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CFD vs Forex - Differences and similarities

CFD and Forex are both unique trading instruments, though they do have a few similarities as well:

  • Firstly, both CFDs and Forex offer to trade with leverage, which allows traders to trade with borrowed money.
  • Similarly, both instruments involve speculation of an instrument’s future price.

Differences between CFDs and Forex:

  •  CFD offers the option to trade in a much wider range of assets, making it easier for traders to diversify their trades. Forex, on the other hand, involves trading of currency pairs only.
  • While the lot size in Forex trading is usually constant (100’000 units of currency), CFDs offer a wide range of contract sizes. The variation in CFD contract sizes depends on the asset you’re trading.
  • The factors that affect the Forex market are mostly economic, political, and environmental, such as employment shifts and international politics. However, the factors that affect CFD markets depend on which instrument/asset you’re trading CFDs on and what could affect the value of that instrument or asset.

 

Factors influencing Forex Trading

Graph Shape

Important political developments

Tax changes

Consumer & producer preferences – CPI or PPI reports

Interest Rate Decisions - Bank of England MPC Announcements, Fed Interest rate Decisions, etc.

Other market-related FX news

Visit our Special Articles page for the latest market news on cryptos, stocks, indices, and more!

CFD vs Forex: Which instrument should you choose to trade and why?

No instrument can be deemed better than the other; however, it’s essential to understand which instrument would suit your trading needs better. It all comes down to what you’re looking for in an investment.

If you’re interested in trading with a limited number of currencies with leverage, then Forex trading might suit you. However, if you want to trade in a wide range of markets and diversify your trades, want to make larger trades with limited capital, and would like to have more flexibility with your investments, then CFDs should be your go-to option.

Here at CAPEX, we offer traders over 2,100 tradable assets that can be traded through CFDs on our smooth and advanced trading platforms – CAPEX WebTrader and MetaTrader 5 (MT5) platform. Plus, we charge the lowest trading fee, commissions, and spreads to ensure our traders have the best trading experience at the lowest cost.

 

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Trading with CAPEX.com

The great thing about CFD trading online is that you can do it anywhere there is a secure internet connection. Inevitably, this means that mobile trading has proven particularly popular as traders can conveniently open and close positions from their mobile or tablet as and when it suits them.
Discover the functionality to ...
Trade more than 2,100 CFDs
Trade more than 2,100 CFDs
Manage your investment horizon
Manage your investment horizon
Set take-profit or stop-loss limits
Set take-profit or stop-loss limits
Open short and long positions
Open short and long positions
No fees for opening and closing positions
No fees for opening and closing positions
Trade with and without leverage (StoX)
Trade with and without leverage (StoX)
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Why trade CFDs with CAPEX – Best online CFD broker

Beginning your trading journey can be overwhelming, especially when you’re investing in CFDs as they’re risky instruments. However, there are a number of reasons as to why you should begin your trading journey with CAPEX which you can read about below.

We value learning

We believe the secret to becoming an expert trader is to obtain knowledge and focus on ongoing learning. Hence, we offer our traders a range of excellent learning tools and features such as an online trading school – CAPEX Academy, where traders can watch videos to learn to trade.

We offer user-friendly trading platforms

Having a trading platform that is simple and easy to use can make your trading experience much smoother and better. Here at CAPEX, we offer two unique trading platforms, both of which are highly intuitive and have a simple interface. From the moment you begin trading with us, you’ll notice how everything is neatly aligned and super accessible.

We offer a wide range of tradable instruments.

Whether you’re interested in commodities, Forex, crypto, stocks, or blends – CAPEX offers all of these along with many more tradable assets. You can trade CFDs on over 2100 tradable assets with us at CAPEX, that too, with the lowest trading costs. We truly believe that diversifying your trades is an effective way to maximize profits and minimize risk, which is why we offer so many trading options.

We offer Islamic accounts for Muslim clients

We have a diverse range of users and value everyone’s beliefs. So, if you’re a Muslim, you can gain access to a swap-free Muslim trading account. All you have to do is get in touch with our customer support team and provide proof of identity, the rest will take care of itself, and you’ll shortly get access to your personalized Muslim account.

Many benefits when trading with CAPEX

Apart from the benefits mentioned above, we at CAPEX offer excellent customer support seven days a week, some of the lowest trading costs, and the smoothest trading experience with the help of advanced tools. All our offerings are a result of our dedication to providing traders with the best trading experience.

 

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Register an account on CAPEX.com and start trading.
Verify

Verify

Send over your documents and verify your account.
Deposit

Deposit

Login into your CAPEX.com account and deposit money.
Trade

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Start trading with CFD’s and over 2100 other instruments.
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How to begin trading today – Sign up with CAPEX

Signing up with CAPEX is super easy and shouldn’t take more than a few minutes. Just hop on to our website and click on the ‘register for an account option. Then enter a few basic details, including your age and email address, plus click on ‘sign up’,

After that, you’ll be redirected to our trading platform, where we’ll ask you to complete your registration. Add a few more details, such as your income, taxation info, and address. Once that’s done, all you have to do is complete a quick assessment – this is designed to assess your trading knowledge and skills so we can make sure that you don’t trade beyond your capacity.

Once the above is done, your account should be verified and ready to use shortly. You can also sign up on our demo account feature to practice trading before you actually invest your capital.

Final thoughts – Trade Forex CFDs with CAPEX

Both CFDs and Forex are popular financial instruments; however, both of them offer unique trading experiences. Since CFDs allow you to trade in a range of markets, trade with more flexibility without owning the underlying asset and offer a fair amount of leverage, they might be the right choice for you.

Plus, you can trade CFDs on Forex with us at CAPEX as well. What better than to experience CFD trading as well as Forex trading at once? To get a glimpse of CFD trading with the best online CFD broker out there, sign up at CAPEX today. You can also sign up for a demo account free of cost and experience CFD trading with zero risks.

CFD vs Forex – FAQ

🤷Is trading with leverage risky?
👀Can CFD trading make you a millionaire?
🤔Can Forex trading make you rich?
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68.60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the risk of losing your money. Trading through an online platform carries additional risks. Refer to our Regulation section here.

Restricted Jurisdictions: We do not establish accounts to residents of certain jurisdictions including Japan, Canada and the USA. For further details please see Terms & Conditions.

Key Way Group Ltd is the holding company of Key Way Investments Ltd, JME Financial Services (Pty) Ltd and Key Way Markets Ltd. Key Way Investments Ltd operates CAPEX.com and is authorized and regulated by the Cyprus Securities and Exchange Commission (CySEC) (license no. 292/16) with branches in Romania and Spain, and registered with the Romanian Financial Supervisory Authority (ASF) (registration no. PJM01SFIM/400013), and with the Spanish National Securities Market Commission (CNMV) (registration no. 129), respectively. JME Financial Services (Pty) Ltd operates za.capex.com and is authorized and regulated by the South African Financial Sector Conduct Authority (FSCA) (license no.37166). Key Way Markets Ltd operates ae.capex.com and is authorized and regulated by the Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (license no. 190005). KW Investments Ltd operates sc.capex.com and is authorized and regulated by the Seychelles Financial Services Authority (FSA) (SD020).